First Uranium to sell its South African assets

First Uranium (FIU-T) says it will sell chief assets — the Mine Waste Solutions (MWS) tailings recovery project and the Ezulwini gold-uranium mine, both in South Africa — for US$405 million as the underperforming junior liquidates to pay off its looming debt.

On March 2, First Uranium signed a definitive agreement to hand the MWS gold-uranium operation to major shareholder AngloGold Ashanti (AU-N) for US$335 million in cash. AngloGold owns 19.8% of the junior.

The company plans to sell its fully owned subsidiary, First Uranium — which owns the Ezulwini mine through its 100% stake of South African company Ezulwini Mining — to Gold One International (GDO-A) for US$70 million.

The Australian miner will also provide a US$10-million loan facility to First Uranium, which has been struggling with delays and operational problems in South Africa. 

As part of the agreement, both buyers will let Franco-Nevada (FNV-T, FNV-N) maintain its gold-stream interest in First Uranium’s assets. Franco-Nevada will receive 25% of all the gold produced through the MWS plant, including treatment of AngloGold’s tailings until Franco-Nevada acquires 312,500 oz. gold, which started Jan. 1, 2012. 

Franco-Nevada will also receive 7% of all gold produced at the Ezulwini mine by Gold One. 

Both asset deals would require a green light from shareholders and the company’s lenders. First Uranium anticipates holding a special meeting for shareholders to vote on the deals in mid-May.

The MWS agreement will require two-thirds shareholder approval — and 50.1% of the votes cannot come from AngloGold shareholders or related parties. For the Ezulwini mine deal to go through, two-thirds of the shareholders must vote in favour of the transaction.

Once the deals close, the company will rake in much-needed cash totalling US$405 million. Escrow accounts will hold US$30 million and US$23 million will go towards covering operating and transaction-related costs. The rest will be used to pay security holders and shareholders.

First Uranium estimates making initial payments of US$167.7 million to note holders, US$147.7 million to debenture holders and US$36.6 million to shareholders.

Once the escrows are released, assuming no claims are made, the company intends to distribute another US$4.6 million to debenture holders and US$25.4 million to shareholders.

On news of the potential sales, First Uranium closed up 9% to 18¢ per share as 7.15 million shares changed hands.